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Tax-related Provisions of State Budget Law of 2018

Ministry of Economic Affairs and Finance


Iranian National Tax Administration


President


 


Letter of Circular:


Tax-related Provisions of State Budget Law of2018


 


Reg. No.     :S/200/97/20


Reg. Date    : May12, 2018-05-23


 


Addressees/beneficiaries: Tax Affairs Offices of Tehran City andProvince as well as all Tax Affairs Directorates General


 


Subject: Tax-related Provisions of State Budget Law of 2018


 


Tax related provisions of the State Budget Law of 1397(i.e. 2018) approved on 11/03/2018 by the Islamic Consultative Assembly (Majlis)are hereby officially communicated in order to be acknowledged and implemented:


 


Note (5):


It is allowed in 1397 (2018), with due regards to[relevant] laws and regulations, that …:


  • Bonds and securities mentioned in this Note are not subject to taxation.


 


Note (6):


a)    The ceiling of the annual basic allowance pursuant toArticle (84) of Direct Taxes Act approved on 22/02/1988 and its subsequent amendmentsfor the year 1397 (i.e. 21/03/2018 to 20/03/2019) shall be IRR 276,000,000. Thetax rate to be applied on the aggregate income derived by government andnon-government employees from salary, wages and allowances, excluding casessubject to Notes (1) and (2) under Article (86) of Direct Taxes Act and itssubsequent amendments with due regards to the Law for Partial Amendment ofRegulations Related to Faculty Members approved on 07/03/1990 as well as itssubsequent amendments and attachments on educational and research affairs,shall be as follows:


  • Amounts exceeding the above ceiling [i.e.amounts exceeding I.R.R 276,000,000] up to an amount three times that ceiling shall be subject to an annual salary income tax rate of 10%;

  • Amounts exceeding three times the ceiling up to an amount four times it shall be subject to an annual salary income tax rate of 15%;

  • Amounts exceeding four times the ceiling up to an amount six times it shall be subject to an annual salary income tax rate of 25%; and

  • Amounts exceeding six times the ceiling shall be subject to an annual salary income tax rate of 35%.


The basic annual allowance of persons subject to Articles (57) and (101) of Direct Taxes Act shall be I.R.R 216,000,000.


Provisions of Article (1) of the Law forPermanent Provisions of the State Development Plans as well as the provisionsof Paragraph (g) of the Law for Partial Regulation of the Government FinancialRules shall override the provisions of the aboveParagraph.


b)   Ministry of Energy shall be required, through companiesfor urban water and waste water all over the country, to receive from thesubscribers, in addition to the price of urban water, a further amount of IRR150 for any sale of one cubic meter of drinking water and remit the same to theaccount of State Treasury General. 100% of the amounts so received shall beallocated to a specific row in the budget of the respective companies only forthe purposes of drinking water pipelining in rural and nomad areas up to aceiling of IRR 750,000,000.000. 20% of the said credit shall be distributed ona quarterly basis among provinces for the purpose of drinking water pipeliningin nomad areas based on population and healthy drinking water indices while theremaining 80% shall be distributed in the same manner for the purpose ofdrinking water pipelining in rural areas; amounts so distributed shall beconsumed upon the exchange of an agreement between the provincial Plan andBudget Organizations and the [respective] companies for rural water and wastewater companies or the Iranian Organization of Nomad Affairs. Such funds shallbe subject to zero-rate taxation.


c)    The relevant administrative authorities shall be requiredto record the tax and customs exemptions and reductions in their respectiveaccounts through a Collected and Refunded procedure. The administrativedirective of this Paragraph shall be jointly prepared and served by the “Ministryof Economic Affairs and Finance” and “Plan and Budget Organization” within twomonths after the approval of the present Law. The Islamic Republic of IranCustoms Administration and the Iranian National Tax Administration shall reporton such exemptions and reductions to the Economic Commission of the IslamicConsultative Assembly. The amounts so exempted and reduced shall be accountedfor as the import tax collected by the I.R.I Customs Administration.


e)     


1)    The following text is added to the Clause (1),Paragraph (C) of the Law for Permanent Provisions of the State DevelopmentPlans:


“Indices related to regions and townships with low employment rates pursuantto this Clause shall be approved by the Council of Ministers upon the proposal tobe made by the Plan and Budget Organization.  


2)    The place of taxation of the VAT and excisetaxes of manufacturing enterprises shall be their place of residence.


f)     The Iranian National Tax Administration is allowed todetermine the VAT of certain groups of VAT taxpayers through applying a reducedVAT coefficient specific to the industries in question. The provisions of this Paragraphshall also be applicable in respect of tax periods for which the VAT has notbeen yet finalized. The VAT coefficient of each industry shall be confirmed bythe Minister of Economic Affairs and Finance upon the proposal to be made bythe Iranian National Tax Administration. 


g)    As per Article (12) of the Law for Partial Regulation ofthe Government Financial Rules Ministries of Petroleum and Energy shall beallowed to receive from each residential or trade unit that is a gas subscribera monthly fee of IRR 2000 and from each residential or trade unit that is anelectricity  subscriber a monthly fee ofIRR 1000 and remit the same to the account of public revenues pursuant to Rows(160185) and (160186) of Table (5) of the present [Budget] Law with the StateTreasury General to be spent for the purpose of cases specified in the saidTable. For rural subscribers, 50% of the above-mentioned amounts shall bereceived. The said amounts shall be subject to zero-rate taxation.


The administrative by-law of this Paragraphshall entail the ceilings and the way to hold public tenders, undertakings ofinsurer companies and the way damages are to be compensated for, and shall beapproved by the Council of Ministers upon the joint proposal to be made by the “Ministryof Economic Affairs and Finance” and the “Plan and Budget Organization”.


h)   The Iranian National Tax Administration shall be requiredto compute and collect the salary income tax of Social Security Organizationemployees for the years 1388 and 1389 (i.e. 2009 and 2010) at the same rate of10% that has been applicable to government permanent employees.


i)      The distribution of excise taxes collected under the VATAct, pursuant to Clause (1), Paragraph (B), Article (6) of the Sixth DevelopmentPlan Law in Tehran and other similar cities shall accord the urban to ruralpopulation ratio whereby 88% shall be allocated to urban areas while theremaining 12% shall be allocated to rural and nomad areas. The discretion ofsuch conditions shall be made by provincial Councils of Planning and Development.


m) As of the beginning of the year 1397 (i.e. 21/03/2018),the retail sale prices of each string of cigarette shall consist of an additionalexcise tax amounting to IRR 75 for cigarettes domestically produced, IRR 150for cigarettes jointly produced [by Iranian and foreign producers], IRR 250 forcigarettes domestically produced under international brands, and IRR 600 forimported cigarettes. Ministry of Economic Affairs and Finance shall be requiredto receive such amounts from producers and importers, whichever the case, andremit the same to the account of public revenue specific to budget Row (160190)under the present [Budget] Law. After the remittance of the revenue under thisParagraph into the account of public revenues with the State Treasury General,an amount equal to it shall be allocated to Ministries of “Sport and Youth” (30%),“Education” (20%) and Health, Treatment and Medical Education (50%) in order tobe spent for the purposes of lowering tobacco consumption, preventing fromdiseases resulting from it, rehabilitation, and treatment of abnormalitiesresulting from tobacco consumption as well as the promotion of sportactivities.


n)   In line with an improvement of environmental indices and adecrease in the destructive consequences of an improper management of ordinaryresidues, the Iranian National Tax Administration shall be required to receivea maximum of 0.5% of the sale value of those products leading to the productionof residues destructing the environment up to a ceiling of IRR10,000,000,000,000 and remit the same into the account of Row (160189) to beallocated to the Organization of Iran’s Municipalities and Village Administratorsin order to be spent on the creation of regional facilities of recyclingresidues into materials and energy. The administrative by-law of this Paragraphincluding the collection method, list of liable commodities, rate ofexpenditures of management of residual products and the respectiveadministrative procedure shall be approved by the Council of Ministers upon theproposal to be jointly made by Ministries of “Interior”, “Industry, Mine andTrade” and “Economic Affairs and Finance” and the Department of Environment.


q)   The government shall be obliged to receive, in additionto the existing import duties, an amount equal to 60% of the net profit derivedfrom the importation of cars during the past two years as surplus tax and remitthe same to the public revenue account specific to the budget Row (110410) and tospend the total of 100% of such revenue, through the cost Row (530000-63), onthe payment of subsidies for supporting the production and employment activities.


The Inspection Organization of Iran shall berequired to have oversight on the implementation of this Paragraph and, in theevent of any violations in imposing tariffs and rent-seeking, shall be obligedto follow up the case with [relevant] judicial authorities.


Any violation from the implementation of thisprovision shall be deemed a misappropriation of the public property.


 


Note (7):


In regard with the claims of the periods before 1397(i.e. before 21/03/2018) of “Industrial Development and Renovation Organizationof Iran (IDRO)” and “Iranian Mines and Mining Industries Development andRenovation Organization (IMIDRO)”for their participation in funding the specializedBank of Industry and Mine as well as claims of the afore-mentioned organizationsand Ministry of Petroleum through their subsidiary state-owned companies fortheir portions in legal sales of shares, the government is hereby authorized totake measures to barter such claims against their debts owned by the governmentas “tax” and “dividend” in a Collected and Refunded method through treasuryoperations up to a ceiling of IRR 4,000,000,000,000 or, rather, take measuresto grant foreign finance credit lines or guarantees for job creating projectsup to a ceiling equal to the claims, with the priority of less-developed anddeprived regions.


 


Note (10):


a)    Insurance companies are required to remit an amount equalto IRR 2,750,000,000,000 of their third party insurance premiums received tothe account specific to the public revenue of the row (160111) under Table (5)of the present [Budget] Law with the State Treasury General on a weekly basisin accordance with a schedule to be specified by the Supreme Council ofInsurance based on the sales portfolio of each [insurance] company. The amountsso remitted shall be at the disposal of “Iran Road Maintenance and Transportation Organization”, the “LawEnforcement Force of the Islamic Republic of Iran” [the Police], and the “StateEmergency Organization” in order to be spent on their relevant rows asspecified in Table (7) of this Law in affairs resulting in the decease of [car]incidents and deaths. The Central Insurance of the Islamic Republic of Iranshall be required to have oversight on the implementation of this Paragraph.The amounts remitted as per the provisions of this Paragraph shall be deemedtax deductible.


“Iran Road Maintenance and TransportationOrganization”, the “Law Enforcement Force of the Islamic Republic of Iran” [thePolice], and the  “State EmergencyOrganization” are required to report quarterly to the Central Insurance of theIslamic Republic of Iran on how they have spent the afore-mentioned amounts.


f)     The funds that have been at the disposal of the militaryparts of the country’s international airports for the purpose of acquisition oflands and have been spent in 2017 or will be spent in 2018 by Iran Airports andAir Navigation Company shall be tax deductable and tax exempted. Moreover, thatpart of real estate and other fixed assets of the [afore-mentioned] companythat is transferred to armed forces [of I. R. Iran] shall also be tax exempted.


g)    The transfer of the surplus of reappraisal of companies,as stipulated in Article (149) of Amended Direct Taxes Act approved on July 22,2015, as capital increment shall be allowed and zero-rated with due regards tothe following conditions:


1)    The above-mentioned companies should be liableto provisions of Article (141) of the Bill for Partial Amendment of theCommerce Code approved on 15/03/1969 on the basis of their financialstatements.


2)     Afterreappraisal, the above-mentioned companies should be excluded from theliability of Article (141) of the Bill for Partial Amendment of the CommerceCode.


 


Note (11):


g)    The tax resulting from the reappraisal of assetsbelonging to Iran s Helicopter Renovation and Logistics Company (PANHA) and the [spare] parts existing in the stockwarehouses of this company shall be zero-rated and the amounts deriving fromthe reappraisal process shall be accounted for as the capital increment of thegovernment in this company.


h)   In the year 1397 (i.e. 2018), the exit tax for pilgrims[on their pilgrimage trips to Iraq] shall be charged on the basis of provisionsof the Budget Law of 1396 (2017).


Those pilgrims who are going to take part in Arba’eenceremony and are going to exit from the country through Iraq’s land borders withinthe period from 25/09/2018 to 13/11/2018 shall be exempt from exit tax.


 


Note (19):


6) Income derived from private and cooperativesectors’ investments on partnership contracts mentioned in this Note shall beentitled to enjoy tax incentives stipulated under Clauses (1) and (2) ofParagraph (e) of Article (132) of Direct Taxes Act, pursuant to provisions ofArticle (31) of the Law for Removing Obstacles to Competitive Production andPromotion of the Country’s Financial System and their subsequent amendments.


 


Note (21):


The term of trial implementation of the VAT Act approvedon 06/05/2008 and its subsequent amendments is hereby extended up to the datewhen the new Act will go into force in the year 1397 (2018).


 


Note (25):


 All provisionsincluded in this [Budget] Law are applicable for the year 1397 (i.e. 21/3/2018to 20/3/2019).


 


Signed by:


Seyed Kamel Taghavinejad


I. R. Iran Deputy Ministry of Economic Affairs &Finance


And President of the Iranian National Tax Administration


Related Pages
A Summary of the Address Instruction on the Issuance of Invoices Pursuant to Article 19 of the VAT Act
Administrative By-Law of Article (107) of the Amended Direct Taxes Act
Administrative By-Law of Note (3) under Article (169) of Amended Direct Taxes Act approved on July 22, 2015
Allow ability of the Interests Paid for the Issuance and Sale of Cooperation Bonds
Bylaw of Paragraph (14) under Article (12) of the VAT Act
Currency Exchange for the Taxpayers with Foreign-Currency Transactions and Foreign-Currency Debts
Extension of the Rule of Note (2) under Article (119) of the Fifth Five-Year Development Plan of I.R.I to Those Entitled to the Tax Exemption Provided in Art. (13) of Law for the Management of Free Trade/Industrial Zones
Letter of Circular on Salary Income Annual Allowance for 1395 (2016)
Letter of Circular regarding the Tax Exemption in Free Trade/Industrial Zones
New Directive Regarding the Prevention from the Exit from the Country
Procedure for the VAT Treatment of Chain Store Companies
Procedure on How to Apply the VAT and Excise Duties in Free Industrial/Trade and Special Economic Zones
Resolutions Made by the Tax Supreme Council regarding Tax Exemption in Free Zones
Resolving Obscurities regarding the Procedure on How to Apply the VAT and Excise Duties in Free Industrial/Trade and Special Economic Zones
Some Provisions Related to Article (197) of the Direct Taxes Act
Starting Point of Calculating the Fines Pursuant to Article (190) of Direct Taxes Act on Understated Incomes (Adjusted Tax)
Supreme Tax Council Opinions on the Obligations of Foreign Companies, Mordad 20, 1397
Tax-Related Provisions of 1395 (2016) Annual State Public Budget
Tax-related provisions of the Law for Removing Obstacles to Competitive Production and Promoting the Country's Financial System
The Exemption of the Profits Derived from Currency Exchange in the Economic Activities Carried Out in Trade/Industrial Free Zones
The Resolution No.: 30/4-5586 Date: June 12, 1995 (issued by the Plenary Board of the Supreme Tax Council on the Tax Exemption of Free Zones)
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